Key Highlights
- Bullion declined approximately 1–1.5% Thursday, settling near $4,441–$4,476 per troy ounce
- Contradictory messaging between Washington and Tehran regarding diplomatic negotiations is creating market volatility
- Crude prices have surged past the $100 threshold as the Strait of Hormuz remains essentially blocked
- Traders now assign nearly zero probability to a Federal Reserve rate reduction in 2024, with 38% odds of an increase before year-end
- Dollar strength is weighing on precious metals by increasing costs for international purchasers
Precious metals experienced a downturn Thursday following a two-session rally, as market participants digested contradictory statements from U.S. and Iranian officials regarding the status of diplomatic negotiations.
Spot bullion declined approximately 1.5% to around $4,441 per troy ounce. Futures contracts for U.S. gold decreased roughly 2.5% to $4,457.
The yellow metal had regained ground above the $4,500 threshold earlier in the week following a significant pullback, buoyed by dollar weakness and tentative optimism surrounding diplomatic efforts.
President Donald Trump declared that Iran was eager to reach an agreement, asserting that the nation had been militarily devastated. He also characterized Iranian negotiators as exhibiting “very different and strange” behavior.
Iran’s foreign minister countered these claims, stating that his government was examining a proposal from Washington but maintained no plans to engage in formal negotiations aimed at ending hostilities.
Market observers indicate that gold is currently stuck in a consolidation phase. “For the immediate future, gold is operating within a specific trading corridor,” explained Max Baecker, President of American Hartford Gold. “The market must break through the mid-$4,500 level to change sentiment.”
Kyle Rodda from Capital.com noted that near-term price action will respond entirely to news flow. “The most significant volatility will materialize early next week when there’s greater clarity about whether the U.S. proceeds with a ground offensive in Iran.”
Crude Surges Past $100 as Key Shipping Lane Remains Blocked
Brent crude pushed above the $100 per barrel mark Thursday. The Strait of Hormuz, a critical passage responsible for approximately one-fifth of global oil and liquefied natural gas shipments, has remained essentially impassable since U.S.-Israeli military operations against Iran commenced.
Energy prices had peaked near $120 earlier this month before moderating somewhat. Current levels remain substantially elevated compared to pre-conflict benchmarks.
Elevated crude prices increase logistics and production expenses, contributing to inflationary pressures. This dynamic reduces the likelihood of central bank monetary easing, creating headwinds for gold since the asset generates no income stream.
Market Abandons Rate Cut Expectations
Prior to the escalation of hostilities, market participants anticipated a minimum of two Federal Reserve rate reductions during the current year. That consensus has undergone a complete transformation.
Data from CME Group’s FedWatch tool indicates virtually zero probability of a rate decrease in 2024. Approximately 38% of market participants are positioning for a rate increase by December. Nearly 93% anticipate the Fed will maintain current policy settings at its April policy meeting.
The U.S. dollar has also appreciated as capital flows toward safe-haven instruments. Dollar appreciation increases the cost of gold for non-U.S. purchasers, typically dampening international demand.
Trump emphasized again Thursday that Iran should seek an arrangement with the United States and restated his position that Tehran’s armed forces have been decimated.
